The US Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against JPMorgan Chase, Bank of America and Wells Fargo for allegedly failing to protect consumers from “widespread fraud” on the Zelle payments platform.

The lawsuit also named Early Warning Services, which develops and operates Zelle.

It is jointly owned by Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, US Bank and Wells Fargo.

The CFPB alleges that customers of the three banks have lost over $870 million since Zelle launched in 2017 due to inadequate fraud prevention and detection measures.

Zelle allows electronic fund transfers via linked email addresses or U.S.-based cell phone numbers.

Cell serves more than 143 million consumers and small businesses, according to Reuters.

CFPB Director Rohit Chopra said: “Feeling threatened by competing payment apps, the country’s largest banks rushed to shut down Zelle.” Failing to put adequate safeguards in place, Zelle became a goldmine for fraudsters while the Victims were often left to fend for themselves.”

The CFPB claims that Zelle’s limited identity verification methods have enabled fraudulent activity, allowing malicious actors to create accounts and easily target users.

Despite numerous fraud complaints, the defendant banks allegedly failed to use this information to prevent further fraud.

The CFPB also accuses them of violating Zelle network rules by failing to consistently and promptly report fraud incidents.

Additionally, it is alleged that the banks violated federal laws, including the Electronic Fund Transfer Act and Regulation E, by failing to properly investigate Zelle customer complaints and take appropriate action on certain types of fraud and errors.

Early Warning reported that fraud and fraud incidents fell by almost 50% in 2023, although transaction volumes increased by 27%, according to its data.

In a statement to Reuters, a JPMorgan spokesman said: “As a final effort to pursue its political agenda, the CFPB is now overstepping its authority by holding banks accountable for criminals.”

“It is an impressive demonstration of regulation through enforcement that bypasses the required rulemaking process.”

“We strongly disagree with the CFPB’s efforts to impose huge new costs on the 2,200 banks and credit unions that offer free Zelle service to their customers,” a BofA spokesperson was quoted as saying by the news agency.

Wells Fargo declined to comment on the news.

“CFPB Sues JPMorgan, BofA, Wells Fargo for Failure to Prevent Zelle Fraud” was originally created and published by Retail Banker International, a brand owned by GlobalData.

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